Wing Hang Bank yesterday delivered its first annual results since completing the takeover of Chekiang First Bank, reporting $80 million earnings derived from cost synergies of the deal. Chairman and chief executive Patrick Fung Yuk-bun said he expected the same amount of contribution from the merger this year, describing the integration of the two lenders as 'seamless and on schedule'. 'Substantial revenue and cost synergies had been realised in 2004,' Mr Fung said. 'We are confident that the full integration benefit will be achieved by the end of 2005, which is earlier than planned.' Overall, Hong Kong's sixth-largest lender posted 35.2 per cent net profit growth to $1.16 billion, its highest to date and beating a market consensus of $1.08 billion. However, the $4.83 billion takeover, which doubled Wing Hang's assets overnight, was also responsible for a seven-percentage-point-jump in its cost-income ratio to 42.2 per cent. Operating expenses jumped 44 per cent to $1.02 billion. Analysts say this year's performance will determine the real value of the deal. 'This will be a crucial year to see if the merger was worth what it cost. Mr Fung's goal to bring the cost-income ratio down to 38 per cent by next year is reasonable and the bank should be able to achieve that,' said BOC International executive director and head of research Anthony Lok. The biggest beneficiary from the merger is the bank's lending business. Net interest income rose 13.7 per cent to $1.79 billion - a growth rate dwarfing those of Wing Hang's rivals - largely due to the addition of Chekiang First's loan portfolio. However, Mr Fung also blamed Chekiang First for Wing Hang's more than 30-basis-point drop in net interest margin last year, which was also considerably higher than the industry average. 'There were, of course, other economic factors that have led to the drop [in interest margin],' he said. 'And while we expect these factors to cause Hong Kong banks to feel more pressure on the margin this year, with our large personal loan portfolio and the size of our operations outside Hong Kong, the situation should be less severe for us.' Other factors contributing to the profit increase include an 83.3 per cent drop in bad and doubtful debt charges and solid growth in bank's operations in the mainland and Macau, which accounted for about 20 per cent of the bank's net profit. One area causing concern was Wing Hang's fee income business, which the Chekiang First merger did not improve. Last year, Mr Fung said he hoped to bring non-interest income to about 35 per cent of the bank's total operating income. While posting 41 per cent growth last year, the bank said ist share of non-interest income remained almost unchanged at about 25 per cent of total income, the same as a year ago. Wing Hang shares fell 0.49 per cent to close at $50.50 yesterday.